Correlation Between Steel Dynamics and Pearl Holdings
Can any of the company-specific risk be diversified away by investing in both Steel Dynamics and Pearl Holdings at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Steel Dynamics and Pearl Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Steel Dynamics and Pearl Holdings Acquisition, you can compare the effects of market volatilities on Steel Dynamics and Pearl Holdings and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Steel Dynamics with a short position of Pearl Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Steel Dynamics and Pearl Holdings.
Diversification Opportunities for Steel Dynamics and Pearl Holdings
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Steel and Pearl is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Steel Dynamics and Pearl Holdings Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pearl Holdings Acqui and Steel Dynamics is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Steel Dynamics are associated (or correlated) with Pearl Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pearl Holdings Acqui has no effect on the direction of Steel Dynamics i.e., Steel Dynamics and Pearl Holdings go up and down completely randomly.
Pair Corralation between Steel Dynamics and Pearl Holdings
Given the investment horizon of 90 days Steel Dynamics is expected to generate 0.2 times more return on investment than Pearl Holdings. However, Steel Dynamics is 5.01 times less risky than Pearl Holdings. It trades about -0.34 of its potential returns per unit of risk. Pearl Holdings Acquisition is currently generating about -1.01 per unit of risk. If you would invest 14,435 in Steel Dynamics on September 13, 2024 and sell it today you would lose (1,695) from holding Steel Dynamics or give up 11.74% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 22.73% |
| Values | Daily Returns |
Steel Dynamics vs. Pearl Holdings Acquisition
Performance |
| Timeline |
| Steel Dynamics |
| Pearl Holdings Acqui |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Modest
Steel Dynamics and Pearl Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Steel Dynamics and Pearl Holdings
The main advantage of trading using opposite Steel Dynamics and Pearl Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steel Dynamics position performs unexpectedly, Pearl Holdings can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Pearl Holdings will offset losses from the drop in Pearl Holdings' long position.| Steel Dynamics vs. Cleveland Cliffs | Steel Dynamics vs. United States Steel | Steel Dynamics vs. ArcelorMittal SA ADR | Steel Dynamics vs. Reliance Steel Aluminum |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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